There has been a stark rise in the number of people declaring personal bankruptcy and entering into IVA agreements within the Northern parts of Britain.

According to accountancy group KPMG, certain areas within the North have seen instances of Bankruptcy more than treble during the first quarter of 2008. Both Newcastle and Sunderland have been identified as the major hotspots for this rise with the increases standing at 30% and 75% respectively.

A spokesperson for the group commented that a culmination of different economic factors such as a dramatic rise in the cost of food as well as household bills and of course mortgage repayments had begun to take its toll on thousands of people across the UK, however, as demonstrated within these findings Britain’s less financially prosperous areas are far less able to acclimatise under the increasing financial strains and thus a rise in insolvency within these lower earning areas is almost inevitable.

A separate survey has also revealed that some 35% of Britons are in the process of reviewing their personal budgets, with a view to assigning new buffer zones to their expenditure and to cover themselves against any further increases to the overall cost of living.

Thousands of credit card borrowers across the UK are having there spending limits restricted, or in the more severe cases their accounts closed completely. However very few providers have been forthcoming with their customers as to why these changes are taking place.

According to recent research, almost 3 million card borrowers have seen their accounts affected in some way over the past few months. Approximately 1/3rd of people have reported that their borrowing limit has been downsized, with the remaining 2/3rds having their account terminated with little to no explanation as to why.

The trend is believed to be having a huge bearing on certain borrowers, especially those people who rely on their credit card facility to manage the payment of bills and gaining from the grace period in which the funds have to be repaid. The sudden withdrawal of card services may have a serious effect on this particular group of consumer’s ability to balance their finances, thus increasing their exposure to debt.
 
It is most probable that restrictions on the overall volume of funds available to credit providers (as a result of the credit crunch) is the primary reason for the sudden change in borrowing facilities, however, providers owe it to their customers to be more open with regards to the specifics of a service retraction, before it is put into place.

An independent financial journalist has recently revealed that a large proportion of Britain’s youth are running the risk of becoming insolvent or requiring IVA assistance due to a wanton need to look good and fit in with their peers.

Accordingly, more than 25% of people aged between 18 and 26 have been found to frivolously spend their month end wages on the latest designer fashions, grooming products, gadgets and gizmos, whilst putting little to nothing aside in case of a financial emergency.

On average, individuals classed within this demographic are likely to fritter a staggering £4500 per year on these societal related needs, which is in turn believed to be pushing a good proportion of said individuals into a negative financial situation, thus running the risk of high end personal debt.

The claim is further supported through the results of separate survey conducted against the backdrop of the same demographic. It was found that approximately 60% of respondents admitted to having credit card and loan debts, which were amassed as a direct result of purchasing similar, non-essential items. In addition, 20% of the respondents claimed that they would much rather spend their cash on non-essential products and services, than allocate it to a savings account or investment bond.

Early estimates into a prospective rise of the number of Brits declaring insolvency during Q1 of this year have unfortunately come to fruition.

Recently released statistics show that the number of people entering into IVA agreements and declaring insolvency surpassed the 25000 mark, equating to a rise of more than 1.5% compared to the fourth quarter of 2007.

However, it has also been noted that although the country is currently in the midst of a major financial reshuffle as a result of the credit squeeze, and in spite of the increase coming at the most common time for insolvencies (post Christmas) the figure is actually 1/6th lower than it was during the first quarter of 2007.

It has also been revealed that of the total number of people declaring insolvency during Q1 of this year, more than 2/3rds have come by way of Bankruptcy, leaving the remaining 1/3rd of insolvents opting to enter into an IVA agreement.

One of the biggest surprises is that the majority of debtors have chosen the Bankruptcy route over an IVA. It is though that a spate of bad press surrounding the IVA procedure during 2007 is the primary reason for the decline in popularity during 2008.

One of the UK’s leading debt charities has recently revealed that many thousands of UK citizens are jeopardising their financial health through the insensible use of credit cards.

Accordingly, almost 40% of people are using credit cards as their primary means to withdraw money from bank cash points. It is suggested that very few consumers are actually aware of the risks they run by using their cards this way, with regards to managing the debt at a later stage.

Credit card cash withdrawals are undoubtedly one of the most expensive ways to borrow, however, the charity responsible for the survey has indicated that very few people appear to be aware of this fact and as to how they will be charged for the transaction.

A spokesperson for the charity stated that more needed to be done with regards to increasing consumer understanding in relation to their credit facilities. In a sizeable number of cases, consumers who do run into credit difficulties admit that a lack of understanding on their behalf and in some cases sheer ignorance with regards to how certain credit is charged and interest calculated, was the primary cause for them to seek professional debt help.

It is important for consumers to be aware that certain credit facilities, used in certain ways, can be extremely costly and affordability should always be considered before any type of commitment is made.

The perceived social shame of being declared Bankrupt is still the primary reason for avoidance of the tool, by the vast majority of indebted Brits.

A spokesperson for one of the countries premier Bankruptcy specialists has stated that literally thousands of consumers will avoid Bankruptcy at all costs for this reason, even if it is genuinely the most viable route for which to pursue.

He commented that faired against other debt tools that are used by the financially impaired such as individual voluntary arrangements (IVA), Bankruptcy is actually far less drawn out as far as the term is concerned (usually around 12 months).

On average, the term of an IVA lasts for around 5 years and requires the customer to apply serious budgetary restraints during that time. However, the fact that the IVA is a lesser-known tool amongst society is essentially making it the more attractive proposition. 

In other news, the CCCS recently revealed that a staggering 60% of its enquirers refuse Bankruptcy as an alternative to their debt predicament, regardless as to whether it makes more sense for them to do so.

One of the UK’s largest debt charities has recently revealed that rising numbers of new IVA cases may not necessarily stem from an increasingly severe consumer debt problem.

The DAB suggests that although consumer debt is obviously fuelling the number of new IVA cases, the fact that consumers are only just beginning to familiarise themselves with the process, is the primary reason for its rapid growth.

A spokesperson for the charity commented that widespread promotion of the IVA has brought a great number of consumers out of the woodwork, and away from the possible prospect of Bankruptcy. Also, in spite of a recent spate of media condemnation with regards to the procedure, in many cases, it is a viable and even necessary process.

In other news, one of the UK’s largest accountancy firms has announced that 2007 will mark a record year for the number of people entering into an IVA agreement, with the total number of new cases expected to exceed the 40,000 mark by Q4.

According to recent research by one of the UK’s largest supermarket chains (J Sainsbury’s), debt consolidation is one of the most common reasons for Brits to procure a personal loan.

Apparently, almost half of all loan applicants apply for finance with the intention of consolidating all of their outstanding debts into one lower, more affordable, monthly repayment.

A spokesperson for the chain suggested that rising consumer debt in the UK is forcing many people to review their financial situation, with a large proportion seeking more effective means to manage their credit commitments.

However, he also advised that any consumer who is considering the loan consolidation route must also actively way up the pros and cons of doing so. A separate study revealed that a sizeable percentage of consumers who do choose such routes actually worsen their situation due to poor management of the loan.

In conclusion, a debt consolidation loan can be an extremely effective way to manage a number of smaller credit commitments, but consumers must realise that self-control is key to its success and in a large number of cases, the latter is usually all that is needed to control a person’s debt situation.

One of the UK’s leading banking institutions has recently announced its intention to make the negative effects of mismanaged overdrafts, or specifically, the charges associated them, publicly available at its numerous cash points located across the country.

The office of fair-trading is said to be delighted at the news, and a spokesperson for the body commented that this type of awareness will go towards helping debt prone consumers avoid the debt related perils associated to such facilities.

He also suggested that the OFT was more than supportive in any type of initiative, devised to make the consumer spend a little more time thinking, before they act. However, the biggest concern at the moment is firmly squared towards the actual charges themselves, which many believe are unethical and are directly responsible for the further hardships of our countries most debt stricken individuals.

At the current time, there has not been an official court ruling against the charges but a number of independent financial bodies and consumer groups are actively lobbying against the charges, in an attempt to have them withdrawn completely.

New information released by the Citizens Advice Bureau suggests that just shy of 7000 Brits contact the agency, on a daily basis, with debt related issues.

Accordingly, of all enquires received by the Bureau, debt help matters are by far the most prevalent. They have also noted that faired against the same time last year, the number of individuals seeking help has increased by more than 55%.

Issues of personal debt are recognised to be one of the nations top concerns. This fact is further reflected in recent Government statistics, which reveals that personal debt has collectively surpassed the 1.5 Trillion pound mark and is still growing.

A spokesperson for the Bureau suggested that whilst as a country, we have been revelling in some fantastic credit offerings; it is unfortunate to see that many are seriously suffering to cope with escalating debt as a result. He further commented that actual visits to their Branches, usually from people in the most dire of situations, had also increased by around 30% in the last year alone.